The new app feature lets higher-paying customers request conversation level, car temperature, and help with bags.
Business success requires two things. (1) becoming the go-to company for people buying whatever your product is, and (2) making decent profits from selling said products.
Since Uber launched in 2009, it has done a good job on point one. Providing a taxi service at a much cheaper price meant it easily snatched away most of the traditional taxi firms’ customers. It also provided an attractive alternative to buses and trains for people unwilling or unable to spend lots of money on transport. Uber is now the world’s biggest ride-hailing business. Almost half of London’s population use it.
But when it comes to the second requirement - making profits - Uber is rather rubbish. Not only has it never turned a profit, it has lost excessive amounts of money: $3 billion in 2018 alone. But Uber says that’s all part of its plan. It figures that if it puts brickloads of money into getting loads of customers now (through expensive methods like big advertising campaigns and subsidising fares) it’ll be able to tap all those people for humongous profits later down the line.
There are several ways this strategy could work. Uber could rely on economies of scale, basically figuring that small amounts of money per customer will still add up to a huge amount if there are lots and lots of them. But most analysts think at current prices spending can never outpace costs.
Or Uber could outcompete all its rival ride-hailing firms until they go bust, and then jack up prices when customers have no other choice. But that’s unlikely to work while public transport and personal cars are still available as alternatives. Instead, Uber could persuade customers to pay more for its service, perhaps by charging them for desirable extras.
Option three is what Uber seems to be going for with its new ‘rider preferences’ option. This allows customers to choose how hot or cold they want the car to be, whether they want the driver to be chatty or silent, and how much luggage space they need. But the feature will only be available for Uber Black premium rides, which are double the cost of regular fares.
Read our explainer on: how firms do business.
